Menu Close

The Practical Side of IFRS

Prepared by Tyler Hudson,, Articling CA Student

For private companies January 1, 2011 is an optional conversion date, but PAE’s (Publicly Accountable Enterprises) will have no choice, they are required to report under IFRS for 2011. This also means that they need to be taking action now as opening balance for the 2011 year ends will need to be IFRS compatible. In practical terms PAE’s need to be up and running with their IFRS plans in less than one month, implementing the changes required to ensure a seamless transition from GAAP to IFRS come year end.

A few issues on conversion that will likely impact your clients will be:

Presentation and disclosure of Financial Statements – IFRS will alter the look and feel of the financial statements, for example there are some significant changes as to how things are classified and organized on the statements of equity, comprehensive income and financial position. In order to encourage a successful transition to IFRS you should be working with clients to develop new statements before year end in order to provide the client with a better understanding of what will be expected at year end.

Property, Plant and Equipment – IFRS allows for the revaluation of PP&E therefore, clients will be required to determine how often they are being revalued as the frequency depends upon the changes in fair values of the items being revalued. Depending on the types of PP&E held by clients, three basic approaches may be used to value such assets:

1) available market information

2) appraisal undertaken by professionally qualified valuator

3) estimate fair value using an income or a depreciated replacement cost approach.

By outlining the assets and the revaluation approaches to be used ahead of time with clients will save last minute, poorly executed and likely more expensive valuations at year end.

For Non-PAE’s conversion will likely be delayed as the benefits of IFRS may not be as obvious, unless specific circumstances, such as an international sale or significant financing / operations from overseas, require IFRS for comparability. For those that do decide to go ahead with IFRS it should be noted that the IASB has posted a considerably less complex standard for SME’s (Small to Medium Enterprises). This standard has removed topics that are not relevant to SME’s, (fewer disclosures are required, accounting policies direct users to the simpler option. Although it may be challenging to convince Non-PAE’s to convert to IFRS for January 1, 2011, but for those that do there is a revised standard specifically designed for them to keep the financial statements simple and relevant to the users.

One of the impacts of implementing IFRS in Canada will be significant fluctuations in income, which will likely create issues such with respect to financing, bonuses, targets, benchmarks, budgets, and a number of financial ratios. By communicating early with your clients and understanding what factors drive their business, what impacts IFRS will have on those factors you can recommend changes so that your clients will come out on top on conversion.


Reliable accounting services for your business

Contact us or learn more about our reliable accounting services to see how we can help you with your year-end taxes and tax planning.